By Timothy Bates, Legal Vision
This month’s article concerns the May 2018 judgement of the Ministry of Education & Others v H Construction North Island Ltd.
It is a substantial judgment so I have focused upon the pertinent facts and just some of the key legal principles to come from it.
• This proceeding concerns Botany Downs Secondary College, a large co-educational school in east Auckland.
• H Construction built the school buildings between 2003-2009.
• Nine of the school buildings are leaky according to the plaintiffs. They also contend it will cost $17 million to remediate the school.
• They contend the buildings leak due to a host of construction defects.
• H Construction contend that whilst the buildings suffer from defects and related poor workmanship, they comply with the Building Code.
• H Construction also contends that its contractual relationship with the plaintiffs prevents liability in negligence in any event.
• H Construction also relies on limitation defences and contributory negligence of the plaintiff as a defence.
Whilst H Construction partially defended the claim on the basis that the construction defects had arisen due to design failings, it did not join the architect as a third party. The court was not willing to apportion blame to a party that was named in the proceeding.
Whilst a plethora of expert witnesses were called to give contradictory evidence on whether the roof leaked, the most probative evidence called was from those that worked at the school on a daily basis.
Councils owe a duty of care to owners of commercial buildings and, similarly, building companies/builders do as well. There is no longer a distinction between residential and commercial buildings. The Building Act 2004 supports such an interpretation.
It is on very rare occasions that this duty can be excluded by contract. It must be expressly and clearly done, and rarely could the exclusion of tortious liability be implied. H Construction argued that the contract conditions required that:
• it perform the works diligently to the architect’s satisfaction,
• it was not to be liable for loss or damage caused by a design defect,
• the architect was to inspect defective works during the defects liability period, and
• the contract included an indemnity for damage due to any act or omission of the Ministry, architect or contractor employed by the Ministry.
H Construction argued that these terms of contract placed the principle obligation on the architect to ensure compliance with the Building Code.
It argued that the imposition of a tortious duty would be directly contrary to the intent of the parties set out in the contract.
Justice Downs disagreed. He ruled that H Construction could have negotiated an express exclusion of tortious liability but chose not to.
Instead, it entered into a standard form contract with a “modest suite of special conditions”. It was ultimately ruled that tortious liability was not excluded.
The duty of H Construction was a duty to ensure compliance with the Building Code which was an endorsement of the finding on the confines of the duty of care, as espoused by J Tipping in Spencer on Byron.
It endorsed the principle outlined in Pullar v R as regards when a defect is construed as being discovered rather than latent.
In the context of the college’s gymnasium floor, the court ruled that once it was identified that the floor was leaking, then the defect had been discovered, even if the fact that wooden packers had been used rather than the aluminium packers as specified was discovered some time after.
Accordingly, the six-year limitation period imposed by the Limitation Act 1950 ran from the discovery of the leaky floor, rather than the discovery of the packers not being wooden.
The guiding principle in relation to tortious damages is for the court to put the plaintiff in the position he or she would have been in if the wrong had not occurred.
It follows from this general statement of principle that if a plaintiff finds itself having to remediate a building to a higher building standard due to changes to the Building Code after a building was constructed but in application at the time it is to be repaired, then all of the building costs are recoverable.
It follows that the betterment defence based upon a higher standard of building code compliance being required at repair stage, was rejected as a partial defence.
Ultimately, H Construction was ordered to pay the plaintiffs the sum of $13.5 million to pay the majority of the construction defects.
Note: This article is not intended to be legal advice (nor a substitute for legal advice). No responsibility or liability is accepted by Legal Vision or Building Today to anyone who relies on the information contained in this article.
Author’s further note: At the time of writing, the World Cup taking place in Russia is at quarter-finals stage. I predict that France will win the 2018 World Cup. By the time readers receive this issue of Building Today the winner will be known, so let’s see how my prediction pans out.